Airport, Estonia, EU – Baltic States, Financial Services, Transport

The government has discussed the issued related to Estonian Air 25 times in the last five years and every time as an urgent matter, usually getting the materials either on the spot or the day before, which made it impossible to study them thoroughly, the National Audit Office said.

"I would like to believe that the manner in which the government made its decisions about Estonian Air is just a one-off bad example. An exception, an accident that does not illustrate the shortcomings in the process of making choices in general. But I'm afraid that this is not the case," Auditor General Alar Karis said in the report.

The National Audit Office finds that the decisions of 2010-2012 to increase the share capital of AS Estonian Air by a total of 47.9 million euros were made by the government without evaluating it thoroughly enough.

In addition, the state support analysis was not commissioned from a foreign expert and the Ministry of Finance, whose task is to advise and coordinate the operations of state institutions in the field of state support, remained a bystander, the National Audit Office said.

In the estimation of the audit watchdog, the negative state support decision of the European Commission could have been avoided if the principles of the State Assets Act had been followed, and made sure that giving money and loans to the airline was purposeful and lawful.

The basis on which the government made decisions about AS Estonian Air was that Estonia needed a Tallinn-based airline by all means. The government did not consider any other options of guaranteeing air services either substantively or thoroughly, and failed to demand a comprehensive business plan of AS Estonian Air, declared realistic by an independent expert, or a legal analysis confirming the compliance of the government's decision with the state aid rules of the European Union, in any of the cases when it decided to give or lend money to the airline.

Despite the opinion of the Ministry of Finance that giving further loans to Estonian Air, which was verging on bankruptcy, was prohibited state aid and the opinion of the Ministry of Economic Affairs and Communications that the prospects of getting a positive decision from the Commission and successful restructuring of the airline were poor, the government formed a principal decision in early 2013, which was based on the prime minister's clear position in the matter, that it would not let Estonian Air go bankrupt and instead give it the financing it needs to at least continue operating until the Commission makes its decision.